12. October 2021 | 13:32 CET
RWE, Desert Gold, Deutsche Bank: Opportunities from conservative to speculative
How to invest when prices are galloping and disruptive fires are increasing? Many investors will opt for blue chips. Indeed, large corporations with steady and stable cash flows offer an opportunity, especially in times of inflation. But which stocks are specifically suitable? Using three shares as examples, we explain how investments can succeed today.
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ISIN: RWE AG INH O.N. | DE0007037129 , DESERT GOLD VENTURES | CA25039N4084 , DEUTSCHE BANK AG NA O.N. | DE0005140008
"[...] Our SMSZ project is the largest contiguous land package of any exploration company in the region at 400km2 and overlays a 38km portion of the prolific Senegal Mali Shear Zone. [...]" Jared Scharf, CEO, Desert Gold Ventures Inc.
RWE: Energy will still be needed in the future
If you prefer a conservative approach, you can take a closer look at the RWE share. Over the years, the energy supplier has given itself a new image and is investing heavily in renewable energy. In the first half of the year, sales increased by a whopping 25.4%, while profits even rose by more than 40%. Nevertheless, the Company is in a difficult situation. Climate neutrality is approaching, and legislators are doing everything they can to achieve this goal. Since RWE still generates around 60% of its energy from fossil fuels, trading emission rights could become increasingly challenging and expensive for the Company in the long term.
On the other hand, Germany, as an industrial location, is dependent on electricity. It is hard to imagine that the new German government will create a framework that will prevent RWE from making an orderly transition to renewable energy sources. The Company is currently investing heavily in wind farms, for example, in the North Sea. The share has lost around 8.7% in the past year. However, it is coming into an interesting area between EUR 28 and EUR 30, where the value could find support. The dividend yield of 2.8% could be another argument in favor of the stock.
Desert Gold: Anticyclical opportunity for the brave
Unlike large blue chips, stocks like Desert Gold are much more speculative. Conversely, this also means greater opportunities, but investors need to look at the specific story behind the Company. Desert Gold operates in Mali and has an area of 410 sq km on the border with Senegal. In the past, gold grades, such as 16.03 g/t gold over 7m, have caused a stir. Further drilling is planned for this fall, with a new resource estimate due in 2022.
The gold in the ground at Desert Gold's properties is valued at a whopping discount as a classic gold developer. Usually, good drill results or company announcements that make production more likely provide short steep rises. That is what happened between April and July 2020, when the stock tripled. However, the past few months have seen more of a consolidation. As the Company has continued to operate and there have been no apparent setbacks, Desert Gold could be a countercyclical opportunity for speculative investors. However, it is advisable to choose smaller position sizes compared to standard stocks. With a market capitalization in the low double digits, Desert Gold must be considered opportunity-oriented.
Deutsche Bank: What can the digital dinosaur do?
Investments in financial stocks could also offer opportunities - at least one might think so. Why? The industry has been adopting a more digital approach for years, and the prospect of slightly rising interest rates could give banks more leeway to boost traditional lending business again. But what does the reality look like? Stocks like Deutsche Bank are always good for short flashes in the pan, but they can also go down again. After all, the Deutsche Bank share broke out to the upside in the last few trading days and reached a new three-month high. Thus, at least the annual high of EUR 12.50 should become realistic again. How things can continue in the long term, however, remains to be seen. The major German banks may always pretend to be modern and innovative, but in practice, the wind from times long past still blows in the towers in Frankfurt.
Financial stocks, such as Deutsche Bank, have catch-up potential from a very long-term perspective, but it is by no means clear that banks will return to their former glory. Things look better for utilities - here, inflation and the industry's energy needs speak for a stable business. Desert Gold is relatively unaffected by external influences: The value should gain momentum if the next drilling hits the mark.